What to Expect from Verifone (PAY) on Thursday

Since the beginning of May, the open interest in June 39 calls has steadily increased from Zero to 20,000 and on Friday last week buyers of 1,200 Jan’16 $41 call paid up to $2.60 as well as another 5,000 added to Jan’17 $50 call open interest. Earnings come out on Thursday, June 4, after the close.

Here is a view from Barclay’s issued on May 29 that gets our attention and reflects on drivers of growth that may not be fully reflected in consensus view:

“We believe a sustainable top-line growth rate in the HSD-LDD range is achievable over the next few years, and expect PAY’s growth rates during F2Q-3Q15 to act as a catalyst/illustrate sustainable growth against tougher compares. We have confidence in this growth potential given:

1) PAY’s recent SMB growth (49% Y/Y) was unrelated to EMV,
2) A 30% addressable market increase,
3) EMV upgrades will last longer than expected,
4) PAY’s partnership with Gilbarco and a large hardware and media opportunity.

We see shares re-rating ~2 turns higher to ~17x over the next 6-12 months and 15c+ upside potential to CY16E EPS of $2.40.”

Long term weekly chart sets up for breakout: